Confused about earnest money and down payment when buying or selling in Aurora? You are not alone. Both involve real cash, but they serve different purposes and happen at different points in a transaction. In this guide, you will learn how each works in Kane County, what is typical locally, and how to avoid common mistakes. Let’s dive in.
Key differences at a glance
- Earnest money is a good-faith deposit you deliver after your offer is accepted to show commitment. It is usually due within a few days and held in escrow.
- Down payment is the portion of the purchase price you bring to closing. It reduces your loan amount and affects loan terms.
- Your earnest money is credited toward your down payment and closing costs on the closing statement, as long as it is properly documented.
- Refund rules for earnest money depend on the contract’s contingencies and deadlines. Down payment is paid at closing when you complete the purchase.
What is earnest money
Earnest money is a buyer’s good-faith deposit once an offer is accepted. It tells the seller you intend to complete the purchase. In Aurora, the amount varies by price point and competition, but a common range in many markets is 1 to 3 percent of the purchase price. In slower or lower-priced situations, a flat amount can be acceptable.
When you pay it
You typically deliver earnest money with the accepted offer or within the timeline in your contract, often 24 to 72 hours. The contract should name the escrow holder and how funds will be delivered. In Illinois, funds are commonly held by a title company, the listing broker’s trust account, or an attorney’s escrow. Always request a written receipt and keep it for your records and your lender.
Refund rules and contingencies
Whether you get earnest money back depends on the contingencies and timelines in your contract. If you cancel within your inspection period, or your financing is denied despite good-faith efforts and you give timely notice, you typically receive a refund. If the appraisal comes in low and no agreement is reached, your contract may allow cancellation with a refund, depending on the appraisal clause. If you default outside of the contract’s allowed exits, the seller may be entitled to keep the deposit as liquidated damages or pursue other remedies, subject to the contract.
Wire safety and receipts
Wire fraud targeting real estate is a real risk. Verify wiring instructions by calling your escrow or title company using a trusted phone number, not an email link. Treat any change in instructions as a red flag and reconfirm by phone. Keep copies of all receipts and transfers so your lender can verify your source of funds.
What is a down payment
Your down payment is the portion of the purchase price you bring to closing. It directly reduces the loan amount and influences your loan-to-value ratio, mortgage insurance requirements, and interest rate options. Program minimums vary: FHA often requires 3.5 percent for qualified buyers, conventional programs can start around 3 to 5 percent, and VA can be 0 percent for eligible borrowers. Many buyers choose higher down payments to improve terms.
When it is paid
You pay your down payment at closing. Your earnest money appears as a credit on the Closing Disclosure and reduces the final cash you need to bring. Lenders will verify where your funds came from, so keep bank statements, gift letters if applicable, and the earnest money receipt handy for underwriting.
How much to offer
The right earnest money in Aurora depends on price, competition, property type, and your financing. On lower-priced or slower listings, you might see $1,000 to $2,500 deposits with standard contingencies. On median-priced homes in a balanced market, 1 to 3 percent is common. In multiple-offer situations, buyers sometimes increase earnest money and shorten contingency windows, which raises risk if you later need to cancel.
Seller considerations in Kane County
As a seller, earnest money helps confirm that a buyer is serious. Work with your agent to set expectations on the amount based on local comps and the home’s appeal. Decide who will hold the funds and confirm that the escrow holder provides a receipt. Review the contract’s contingency timelines, default remedies, and any liquidated damages language before you accept an offer.
Lender, appraisal, and risk
Lenders count earnest money as part of your cash to close if it is documented with receipts and bank statements. If the appraisal is low, you may need to bring additional funds or renegotiate price. If no agreement is reached and you cannot cover the difference, the contract’s appraisal clause will guide whether you can cancel and receive your earnest money. Always track deadlines and provide required notices in writing to preserve your rights.
Offer-to-closing steps
- Confirm the deposit amount and the exact due date in the accepted contract.
- Deliver funds to the named escrow holder and get a written receipt the same day.
- Calendar your inspection, financing, and appraisal deadlines and send all notices in writing.
- Keep clean documentation of your earnest money and down payment sources for underwriting.
- Before wiring any funds, verify instructions by phone with the escrow or title company.
- Match your earnest money receipt to the credit on your Closing Disclosure before signing.
Checklists
Buyer checklist
- Confirm deposit amount, holder, and due date in your contract.
- Obtain a written receipt for earnest money immediately.
- Keep bank statements and gift letters, if any, to document funds.
- Track inspection, financing, and appraisal deadlines and deliver notices on time.
- Verify wiring details by phone before sending any funds.
- Ask which title company will hold escrow in Kane County and save contact info.
Seller checklist
- Confirm who holds earnest money and require a prompt receipt.
- Review contingency and default language with your broker or attorney.
- Save all notices and communications in case of a dispute.
- Coordinate early with the title company about closing timelines and local fees.
Aurora closing logistics
Title companies in Kane County handle escrow, issue closing statements, and show your earnest money credited to you on the final figures. Transfer taxes, recording fees, and other county items are handled at closing. Your Closing Disclosure will account for your earnest money credit, down payment, and lender fees. Confirm final numbers before your signing appointment to avoid last-minute surprises.
Mistakes to avoid
- Offering too little earnest money in a competitive situation. It can make your offer less persuasive.
- Missing contingency deadlines and losing leverage on refund rights. Set reminders.
- Wiring funds to the wrong account. Always verify by phone.
- Failing to document your source of funds for the lender. Keep statements and receipts.
- Waiving contingencies without a backup plan. Understand the risk of forfeiting your deposit.
Work with a local team
Whether you are buying or selling in Aurora, a clear plan for earnest money and down payment can protect your budget and your timeline. You deserve straightforward guidance on amount, timing, documentation, and contract deadlines tailored to your situation. If you want a local, high-touch team to help you plan your next move, connect with The Jeff Stainer Team today. Get your free home valuation.
FAQs
What is the difference between earnest money and a down payment?
- Earnest money is a good-faith deposit held in escrow after your offer is accepted and is credited to you at closing. A down payment is the larger amount you bring to closing to reduce your loan.
Is earnest money refundable in Aurora contracts?
- It depends on your contingencies and timelines. If you cancel within a valid contingency window and give notice as required, you typically receive a refund. If you default outside the contract’s rules, you could forfeit the deposit.
How much earnest money is typical in Aurora?
- Many buyers offer 1 to 3 percent of the price in balanced markets. Lower-priced or slower listings may accept flat deposits like $1,000 to $2,500. Amounts rise in multiple-offer situations.
Who holds earnest money in Illinois?
- Earnest money is often held by a title company, a listing broker’s trust account, or an attorney’s escrow. Your contract names the holder. Always request a written receipt.
Can my earnest money count toward my down payment?
- Yes. At closing, your earnest money is credited toward your down payment and closing costs on the Closing Disclosure, as long as it is documented.
What are typical down payment minimums?
- FHA is often 3.5 percent for qualified buyers, many conventional programs start around 3 to 5 percent, and VA can be 0 percent for eligible borrowers. Many buyers choose to put more down to improve loan terms.
How do I avoid wire fraud when sending earnest money?
- Call your escrow or title company at a known phone number to confirm wiring instructions and treat any emailed changes as suspicious. Keep receipts for every transfer.
What happens if the appraisal is low?
- If you cannot renegotiate or bring extra funds, your appraisal clause will guide whether you can cancel and receive your earnest money. Follow all notice timelines in your contract.
